Archive for the ‘Compensation’ Category
Motivation: Reinforce with Points, Reward with Money
Posted by: grandma in Employee Engagement, Incentive Compensation, Performance Management, Talent Management on June 24th, 2009
Behavior is a function of its consequence. Employees tend to focus their activities on the things with the highest pay-off. For these activities, it is important to show the instrumentality between a goal achieved and reward earned. In other words, what will the employee receive as a result of their achievement? The biggest difference between an employee reward and a reinforcer is the immediacy of the consequence. Rewards tend to be latent and monetary; Reinforcers need to occur daily and shape behavior as it happens. It is much better for the manager/employee to correct problems as they happen instead of waiting for the annual review.
One issue with focal/anniversary reviews is the goal period. Focal reviews tend to measure on a yearly or 6 month basis. The pay-off of the reward is too far in the future. The certainty of getting the reward needs to be present in order for the program to be successful. If your company does not have a history of celebrating successes, then you will be challenged to put forth a credible reward system.
So how do managers motivate their employees?
Your manager needs to ask these 3 questions of his/her employees to motivate them:
1) Do you anticipate your employee being satisfied with achieving the goal? (This is Valence – or anticipated satisfaction) – If this isn’t present than the activity is a non-starter for them.
2) What will he/she receive when it is achieved? (This is Instrumentality) – This is where a point/reward system comes in. What will I get if I achieve? This is the key factor of the 3.
3) Will the effort put forth actually yield achievement of the goal? (This is Effort Expectancy) If the employee knows that extraordinary effort is required for little payback, then they are not likely exhibit behaviors to achieve the goal.
(abridged from Organizational Behavior, Securing Competitive Advantage, John Hollenbeck and John Wagner, 2005)
So how do you reinforce behaviors that will accomplish your motivational techniques? Here is one system that your company can implement:
Establish a Company-wide Point System
Establish a point budget. Just as monies are allocated for budgets, management should set a point budget based on the available rewards. These allocations happen just as a budget for merit increases would. Points can be allocated using your incentive compensation/salary planning solution. Give each of your front-line managers a bank of points, much like a merit budget, to be used to divvy up among employees. Points should be given based on the employee performance for the month. Increasing the frequency of the consequence will lead to daily/weekly performance improvements.
Be as creative as you want here. Assign a point total to each reward. Since reinforcement and rewards are highly individualistic, you may want to give managers the flexibility to create their own. As employees accumulate rewards, they can cash them in for one of the services provided in your reward point catalog:
• Cooking classes
• Golf membership for one year
• Free Spa day
• Gym membership for one year
• Titanium DirecTV package
• Housecleaning for one year
• Dog boarding for one year
• Daycare for one year
• Lease on an exotic car
• Manicure/Pedicure
• First class upgrade on all business flights
• Free car wash
• 2 round-trip airline tickets
• Day-off with pay
• Week off with pay
• Lunch with the CEO
• Golf with the CEO
etc….
I think you get the picture. You should also create rewards that have no added cost to the company. Steve Kerr, former GE SVP of HR, has written extensively on cost-neutral rewards. He advocates that these types of rewards should be visible making them highly powerful. Monetary awards don’t give companies that luxury.
Unions, EFCA and Company Performance – Part 2
Posted by: grandma in Compensation, Employee Engagement, Goals, Performance Management, Talent Management on March 27th, 2009
One fundamental issue with anniversary or focal performance reviews is how often the frequency of behaviors are measured. For unions, the frequency of measurement should naturally go way up, but for the wrong reasons. These measurements will tend to reflect whatever negative behavior occurred. There is less incentive for the manager to reward good behavior because he/she can’t – that particular employee gets lumped into a group where discretionary effort is not rewarded properly. So how do companies improve performance in a union environment without a proper reward system?
Here are 3 techniques that managers in union environments can utilize to improve performance in their work group:
1. Aligned Goals
2. Grandma’s Law
3. Reward Point System
Aligned goals are one way to unite unionized workgroups. Missions of both the union and the employees should be the same. These goals elements should be the primary leverage points in an employment contract. Always ask how union demands align with the goals and the core values of the company. If they don’t, the demand is a non-sequitor. Aligned goals will make the employee feel their activities are part of the overall strategy. They also erase the divide between the competing interest of management and unions.
Managers can use techniques like Grandma’s Law to influence behavior. Watch what activities your employees do when given a choice. Make those activities contingent upon the completion of tasks that are necessary for their position. Aubrey Daniels has some great examples of this in his book on performance management. You will find that production will go way up when an employee knows they have to complete Task A in order to move on to the more enjoyable Task B.
Utilize a point system versus monetary incentives – some would argue that point systems do way more to shape behavior than any other reinforcer. Money tends to be a reward for something but generally isn’t a reinforcer of behavior. Earning points for many people is a badge of honor. Look no further than an airline point system – anyone that has flown over a million miles on American has bragged about it. There are several companies that offer merchandise and experiences based on a point system – it is also easy to create your own but be sure you have the individual in mind when doing so.
Transactional Performance is True Performance
Posted by: grandma in Compensation, Incentive Compensation, Performance Management on February 14th, 2009
If your retail manager put $500 on the table and told you it was yours if you picked up his dry-cleaning, you would probably sprint to your car. Pure-play talent management vendors like Success Factors, Authoria, and Halogen sell performance management software that manages an employee’s focal or anniversary review. There are a lot of advantages to this, but I don’t think these types of reviews truly improve performance like a transactional system would.
Why? Call it PIC.
Aubrey Daniels has done some great research on motivation and consequences in his book, Bringing out the Best in People. Daniels uses the above abbreviation – Positive, Immediate, and Certain – in the context of a positively motivated consequence. Conversely, he argues that the same behavior can result when a negative motivator, NIC, is applied. “I will fire you if you don’t get my dry-cleaning in the next 10 minutes.” Daniel’s research shows that NIC will work to get results, but only in the short-term. You’ll get pretty tired of your boss if he continually brow beats you to death.
There are several companies that sell transactionally based performance management systems, but they do not classify them as such. Callidus, Xactly, Synygy, and Oracle all sell systems coined Sales Incentive Management (SIM). Oracle at one time called it Enterprise Incentive Management (EIM), but these niche vendors and Gartner defined the market differently so SIM stuck. I bet it will go back to EIM in the near future. These incentive systems apply to many workgroups beyond just sales. The biggest difference between a reward and a reinforcer of behavior is the immediacy of the consequence. To me, these vendors have products that enable “Pay-for-Performance” because they do it transactionally.
Why?
1) Subjectivity is left out – how many credit card applications did you sell today?
2) Ratings of employees are not inflated – “meets standards” doesn’t have a negative connotation when what you produce really matters.
3) The frequency of the behavior is measured more often. Focal reviews tend to measure no more frequently than quarterly or yearly in most cases.
Let’s look at “I”
“I” is for immediate. The $500 would be paid on the spot after the employee returned the boss’ dry-cleaning. He could have been fired as well if he didn’t get it (NIC). The converse of this is “Future”. Much like focal performance reviews, a raise in 12 months doesn’t exactly motivate someone to do something in the present. Ask your commissions only sales force if the want to be paid immediately and I doubt any of them would say no. MaryKay is a great example because they pay their independent consultants when the transaction is conducted.
Let’s look at “C”
“C” is for certain. The employee knew he was going to get the money because it was laid out in front of him. The converse to this is obviously uncertain. Most companies give an average annual raise of 2.8%. No one is going to bust their butt for a nominal raise like that. Additionally, companies don’t exactly cascade merit increases down to the individual. Most do it by group, equally, so the pot of money is only so big for high performers.
Where does this leave pure-play Talent Vendors? They still measure competencies better than everyone else, and the EIM vendors can’t touch them on this functionality. A bank teller won’t have any transactional goals, so how can they improve the teller’s performance? Measure him or her on competencies instead. Who wants a teller that gives you your money fast but is a curmudgeon in the process?
Note: An interesting observation Aubrey Daniels’ book and his other on Performance Management is that Human Resources is never mentioned. Performance Management should be owned by management and enabled by HR.